U.S. court reverses fee award to ex-Goldman programmer

Sept 3 Wed Sep 3, 2014 10:46am EDT

Sept 3 (Reuters) - Goldman Sachs Group Inc should not have been ordered to pay former programmer Sergey Aleynikov's legal fees to defend against criminal charges that he stole secret code from the bank's computers, a divided federal appeals court ruled on Wednesday.

Reversing a lower court ruling, the 3rd U.S. Circuit Court of Appeals said it was ambiguous whether Aleynikov's former title as a Goldman vice president made him an "officer" under the bank's bylaws, qualifying him for reimbursement for fees exceeding $3 million.

Writing for a 2-1 majority, Circuit Judge D. Michael Fisher returned the case to U.S. District Judge Kevin McNulty in Newark, New Jersey. The dissenting judge, Julio Fuentes, would have construed the ambiguity against Goldman, and ordered the bank to advance legal fees to Aleynikov.

Kevin Marino, a lawyer for Aleynikov, said he will ask the panel or the entire 3rd Circuit to reconsider the decision, saying the ambiguity "compels judgment in Mr. Aleynikov's favor."

Last October, McNulty ordered Goldman to cover legal fees, then exceeding $700,000, that Aleynikov had incurred in defense against a New York state criminal case, which remains pending.

McNulty also denied Aleynikov's bid to recoup more than $2.3 million of fees to defend against prior federal charges, pending more evidence on the total sum actually due.

The 3rd Circuit also rejected Goldman's request to dismiss Aleynikov's fee request altogether.

Goldman spokesman Michael DuVally declined to comment.

A Manhattan federal jury had in December 2010 convicted Aleynikov of stealing code from Goldman as he was preparing to join a Chicago high frequency trading start-up.

Aleynikov had served 11 months of an 8-year prison term when a federal appeals court in February 2012 voided his conviction, saying prosecutors had improperly applied federal laws on corporate espionage.

But in a surprise move six months later, the office of Manhattan District Attorney Cyrus Vance Jr charged Aleynikov with state crimes based on the same alleged misconduct.

The case is Goldman Sachs Group Inc v. Aleynikov, 3rd U.S. Circuit Court of Appeals, No. 13-4237. (Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)